by USA TODAY

by USA TODAY

CHICAGO (AP) - Federal appeals court judges on Monday questioned the bankrupt Archdiocese of Milwaukee's claim that it needs all the money in a $55 million trust fund to maintain its cemeteries and asked whether some could be used to compensate victims of clergy sexual abuse without violating the Catholic faith.

The three judges grilled attorneys in a dispute over a cemetery trust fund created by New York Cardinal Timothy Dolan when he was archbishop of Milwaukee. A federal judge in Milwaukee previously ruled the money was off-limits to the hundreds of sexual abuse victims who have filed claims against the archdiocese in bankruptcy court.

The lawsuit has potentially far-reaching consequences because many Catholic dioceses hold money in trust. A victory for victims in Milwaukee could pave the way for others elsewhere. The appeal also has generated interest in legal circles because the federal law cited by the lower court judge has been an issue in gay marriage, birth control and other cases involving religion.

Attorneys came to the 7th U.S. Circuit Court of Appeals in Chicago expecting to talk about the 1993 Religious Freedom Restoration Act, which protects religious organizations from government interference. Trust fund attorneys claim the court-appointed committee that represents sexual assault victims and others owed money by the archdiocese is an arm of the government. The committee's lawyers dispute this, saying the committee acts independently from the bankruptcy court and the U.S. bankruptcy trustee who appointed it.

The judges questioned attorneys to clarify their thoughts on the law but diverted frequently to ask questions about the trust fund and the judge who declared it out-of-bounds in the bankruptcy case.

Victims' attorneys told the court that U.S. District Judge Rudolph Randa should have disqualified himself from the case because his parents and other relatives are buried in an archdiocese cemetery, and he accepted without question the archdiocese's claim that maintaining the cemeteries was a core tenet of the Catholic faith. The attorney for the trust, Brady Williamson, said the family bought the sites nearly four decades ago and Randa has had no involvement with the cemetery since then.

Judge Ann Claire Williams said she found the issue "troubling" and suggested it was the judge's duty to make attorneys aware of the potential conflict. Victims' attorneys did not learn about the burials until after Randa ruled.

Williams also asked Williamson how the archdiocese's duty to maintain the cemeteries compared to its other obligations.

"You would agree that it's a core mission to have a priest nurture his flock in an appropriate manner?" she asked.

Judge Robert Dow asked whether all $55 million was needed to maintain the cemeteries, or whether the archdiocese could fulfill its obligations while diverting some money to other purposes. Marci Hamilton said that is a question she and other attorneys for the victims would have asked a higher church authority while preparing for trial if Randa hadn't dismissed the suit.

Dow suggested attorneys would want to question the pope, but James Stang, who argued the case with Hamilton, said later that they would have just asked the court to seek a written opinion from the Vatican.

Judge Joel Flaum asked Williamson whether there was any information in the court record on how much the archdiocese spent to maintain the archdioceses. Williamson said there was not.

A financial statement filed in the bankruptcy case shows the archdiocese spent about $400,000 on cemetery operations during the fiscal year that ended June 30.

The judges also heard a second appeal stemming from the archdiocese's bankruptcy. The victim settled with the archdiocese for $80,000 in 2007, but later tried to reopen his claim in bankruptcy court, saying he was deceived during mediation.

His attorney, Jeff Anderson, said Randa should not have dismissed the claim without hearing evidence from the mediation. Archdiocese attorney Frank LoCoco said Randa acted correctly in not allowing the victim to back out of the deal.

The appeals court's decision in this case will affect about 85 other victims who also filed bankruptcy claims after signing settlements.

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